The artificial intelligence (AI) industry in China is a rapidly developing multi-billion dollar industry. As of 2021, the artificial intelligence market is worth about RMB 150 billion (US$23.196 billion), and that figure is projected to reach RMB 400 billion (US$61.855 billion) by 2025. By 2030, AI could disrupt transportation and other key sectors in China, adding significant economic value—but only if strategic cooperation and capability building occur across multiple dimensions.
In the past decade, China has built a solid foundation to promote its AI economy and made significant contributions to its development on a global scale. Stanford University's AI Index, which evaluates the progress of AI around the world according to various research, development and economic indicators, ranks China among the top three countries in terms of global AI viability. For example, in research, China produced about one-third of AI journal articles and AI citations worldwide in 2021. In economic investment, China accounted for nearly one-fifth of global private investment funding in 2021, attracting $17 billion for AI startups.
Currently, AI is widespread in China's finance, retail and high-tech sectors, which together account for more than a third of the country's AI market (see sidebar "Five Types of AI Companies in China"). In the technology sector, for example, leading companies Alibaba and ByteDance, which are well-known in China, have become famous for their highly personalized AI-based consumer apps. In fact, most of the AI applications that have become widespread in China to date have been in consumer-facing industries, supported by the world's largest base of internet consumers and the ability to engage consumers in new ways to increase customer loyalty, revenue and market valuation.
It is correct that the artificial intelligence (AI) industry in China has been growing rapidly in recent years. In 2021, the AI market in China was valued at around RMB 150 billion (US$23.196 billion), and it is expected to continue to grow in the coming years. According to some estimates, the market is projected to reach RMB 400 billion (US$61.855 billion) by 2025.
The growth of the AI industry in China has been driven by a number of factors, including strong government support and investment, the availability of skilled labor and resources, and the increasing demand for AI technologies and solutions in various sectors of the economy. China has also become a global leader in AI research and development, with many major tech companies and research institutions based in the country.
In addition to the domestic market, the AI industry in China is also a significant player in the global market. Chinese AI companies are increasingly expanding their operations internationally and collaborating with partners in other countries.
China is home to a number of large and well-established AI companies, as well as a vibrant startup ecosystem. Some of the key players in the Chinese AI industry include Tencent, Baidu, and Alibaba, which are all major players in the global AI market. In addition, there are many smaller startups and research institutions working on cutting-edge AI technologies, such as natural language processing, computer vision, and machine learning.
The Chinese government has also played a significant role in the development of the AI industry in the country. It has invested heavily in research and development, and has established a number of initiatives and programs to support the growth of the AI industry. In addition, the government has introduced a number of policies and regulations to encourage the adoption of AI technologies, such as tax incentives and funding programs.
The growth of the AI industry in China has been driven by a number of factors, including the availability of large amounts of data, strong government support and investment, and the presence of a large pool of highly skilled talent. In addition, China's growing domestic market and its status as a global manufacturing hub have also contributed to the growth of the AI industry in the country.
Despite this growth, the AI industry in China still faces some challenges, such as the need for further investment in research and development, as well as the need to address issues related to data privacy and security. Nevertheless, the future looks bright for the AI industry in China, and it is expected to continue to play a significant role in the country's economic and technological development in the coming years.
It is certainly possible that AI could have a significant impact on transportation and other sectors in China by 2030. AI has the potential to revolutionize many industries by automating tasks, improving efficiency and productivity, and enabling the development of new products and services. In the transportation sector, for example, AI could be used to optimize routes, predict maintenance needs, and improve safety.
However, it is important to note that the potential for AI to disrupt these sectors will depend on several factors, including the development of the necessary technology and infrastructure, the adoption of AI by businesses and organizations, and the availability of skilled personnel to work with AI. In order for AI to have a significant impact in China by 2030, it will be important for strategic cooperation and capability building to occur across multiple dimensions, including government, academia, and industry. This will require a concerted effort to invest in research and development, establish partnerships, and create a favorable regulatory environment for the deployment of AI.
Unlocking the full potential of these AI opportunities typically requires significant investment - in some cases much more than executives might expect - on many fronts, including the data and technology that will underpin AI systems, the right talent and organizational mindset to build these systems, and new business models and partnerships to create data ecosystems, industry standards and regulations. In our work and global research, we are finding that many of these factors are becoming standard practice among companies that derive the most value from AI.
To help executives and investors marshal their resources to accelerate, disrupt, and lead in AI, we dive into the research and first share where the biggest opportunities lie in each industry, and then outline the key enablers that need to be addressed first.
Automotive, transportation, and logistics
China's car market is the largest in the world, surpassing the United States in the number of vehicles in use. Its size - which we estimate will grow to more than 300 million passenger vehicles on China's roads by 2030 - provides fertile ground for AI opportunities. According to our research, AI could have the greatest potential impact on the industry, delivering an economic value of more than $380 billion. This value is likely to be generated predominantly in three areas: autonomous vehicles, personalisation for car owners and fleet asset management.
Autonomous or self-driving vehicles. Autonomous vehicles account for the largest portion of value creation in this sector ($335 billion). Some of this new value is expected to come from reducing financial losses such as medical, first aid and vehicle costs. Accidents on the road are expected to be reduced by an estimated 3 to 5% per year because autonomous vehicles actively navigate their surroundings and make real-time driving decisions without being subject to many distractions, such as texting, that tempt people. Value would also result from the savings to drivers as cities and businesses replace passenger vans and buses with shared autonomous vehicles.
Traditional automakers and AI players have already made significant progress in developing autonomous driving capabilities to Level 4 (where the driver does not need to pay attention but can take control) and Level 5 (fully autonomous capabilities where the inclusion of a steering wheel is optional). For example, WeRide, which has achieved Level 4.5 autonomous driving capabilities, completed a pilot of its Robotaxi in Guangzhou, completing nearly 150,000 accident-free, active-responsibility trips in one year.
Personalized experiences for car owners. By using AI to analyze sensor and GPS data - including the condition of vehicle components, fuel consumption, route selection and driving habits - automakers and AI players can increasingly tailor recommendations for hardware and software updates and personalize the driving experience for car owners. For example, NIO's advanced driver assistance and automotive battery management system can monitor EV battery health in real time, diagnose usage patterns and optimize charging cadence to improve battery life while drivers go about their daily activities. According to our research, this could generate $30 billion in economic value by reducing maintenance costs and unexpected vehicle failures, as well as generating additional revenue for companies that find ways to monetize software updates and new features.
Artificial intelligence could also be instrumental in helping fleet managers better navigate China's vast network of railways, highways, inland waterways, and civil air routes, which are among the longest in the world. According to our research, $15 billion in value could be created as OEMs and AI players specializing in logistics develop operations research optimizers that can analyze IoT data to identify more economical routes and lower-cost maintenance stops for fleet operators.8 One automotive OEM in China now offers fleet owners and operators an AI-based management system to track fleet location, monitor fleet health, and analyze trips and routes. It is estimated to save up to 15% in fuel and maintenance costs.